Tax Free Crypto - NICE!

You can sum up the appeal of a Roth IRA in three words: federal tax benefit. Add on top of that the new potential of huge earnings in cryptocurrency and you have a powerful combination. Earnings in a Roth IRA grow tax free as long as the owner abides by the Internal Revenue Service (I.R.S.) rules, and withdrawals are federally tax free once you reach age 59½ and have held the Roth IRA for at least five years.1Unfortunately, some people make too much money to contribute to one. In 2021, joint filers with modified adjusted gross incomes (MAGI) of $206,000 or more and single filers with MAGI of $139,000 are not eligible for a ROTH IRA.There is a way for high earners to bypass these limits, however: the “backdoor” Roth IRA strategy.2High-income taxpayers may create Roth IRAs indirectly. This involves a little maneuvering, but may be of interest to certain investors — and also can also be invested in crypto nowadays.The “backdoor” IRA strategy typically starts with the creation of a traditional IRA. The contributions to this new IRA are usually non-deductible, because of the IRA owner’s high modified adjusted gross income. This new traditional IRA is fully or partly funded, and with a financial professional’s help, it is quickly converted to a Roth IRA, and any tax liability is paid.3 Sometimes finding an investment professional who has knowledge in cryptocurrency is a challenge but they are out there. Backdoor Roth IRAs are great potential environments for crypto.